One other point about Mr. Droke's discussion of the collapse in bonds, Mrs. Peel.
As I stated in a previous post, the Fed sells T-bills to sop up liquidity in the money supply. If Bonds are "crashing" it's quite likely due to the Fed stepping in and selling T-Bills to drain liquidity from the system as cash is redeployed back into other asset classes.
Secondly, if there were an aversion to borrowing, we'd be see real rates (not just the Fed funds, and discount) rates continuing to decline. But that's not happening that I'm aware of. In fact, mortgage rates seem to have bottomed and are increasing again. Thus, the market is anticipating that the Fed has finished easing and is now back into a tightening mode (hopefully more gradual than before), and factoring in the likelihood that the Fed will be selling T-bills to drain liquity. Given the relatively small amount of T-bills it has to "work with" (due to the small public national debt in the US), when the Fed sells, it's creates ripples in the bond markets.
Mr. Droke also seemingly ignores the fact that US Treasury bills were in a raging bull market over the past year and half, and GOOD LORD, they NEED to consolidate... Given the excesses in the treasury bond markets as the equities markets deflated, there has to be a return to some sanity. But it's NOT the end of the world as Mr. Droke would like to claim that it is.
futures.tradingcharts.com
(PS: Someone tell me if the chart above is currect, because that's just astounding!!)
Hawk |
